Wednesday, November 18, 2009

The American Institute of Architects' Architecture Billings Index (ABI) reached its highest mark since August 2008 with its October rating of 46.1, up sharply from 43.1 in September and 41.7 in August. The August 2008 watermark came just before the fall 2008 credit crunch affected not only the AEC industry, but the entire economy.

As a leading economic indicator of construction activity, the ABI reflects the approximate 9- to 12-month lag time between architecture billings and construction spending.

Even though the ABI has improved for two consecutive months, the October rating of 46.1 indicates a continued decline in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry score was 58.5, following the 59.1 mark in September.

"This news could prove to be an early signal toward a recovery for the design and construction industry," said AIA Chief Economist Kermit Baker. "On the other hand, because we continue to get reports of architecture firms struggling in a competitive marketplace with a continued decline in commercial property values, it is far too early to think we are out of the woods."

While Baker says it is too early to think we have emerged from the economic downturn, two straight months with an improved ABI rating stops the up-and-down pattern of the past several months. The index was 42.9 in May, dipped to 37.7 in June, increased to 43.1 in July, dipped to 41.7 in August, went back up to 43.1 in September and has now improved to 46.1.

Numbers that constantly move up and down make it difficult for architecture firms to make strategic decisions with any certainty that their fortunes are turning for the better. Clearly, two months with improved ABI numbers is not a large enough sample to determine with any certainty if conditions will continue to brighten, but any positive sign is one that will be welcomed by architecture firm leaders.

The new projects score was 58.5 in October, down slightly from 59.1 in September, but both months are ahead of the 55.2 in August, 50.3 in July, and 53.8 in June.

The bright spots regionally were in the South and West, posting their highest numbers in several months while the Midwest held flat for the third straight month and the Northeast dipped.

Regional averages were as follows: South (46.1, up sharply from 42.7 in September, 44.1 in August, 43.4 in July, and 40.5 in June), West (42.8, up sharply from 36.0 in September, 37.5 in August, 39.7 in July, 39.9 in June, 39.4 in May, and 39.2 in April), Midwest (43.0, the third consecutive month at that number), and Northeast (44.3, down from 47.2 in September and 45.2 in August, but up from 37.8 in July and 42.8 in June).

The October ABI breaks down by sector as follows: institutional (48.7, up sharply for the second straight month from 43.9 in September and 37.5 in August), multi-family residential (45.4, up slightly from 45.1 in September, 43.4 in August, 40.7 in July, and 42.7 in June), commercial/industrial (41.7, up from 39.0 in September, bbut down from 45.6 in August and 42.9 in July), and mixed practice (39.1, up from 36.3 in September, but down from 41.4 in August, 42.9 in July, 43.5 in June, 44.5 in May, 44.2 in April, and 44.0 in March).